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On 25 February 2009, the Institute of Directors of Southern Africa (IoD) released a Draft Code of Governance Principles for South Africa 2009 with the aim of addressing changes in governance trends in line with international practice and in anticipation of the enactment of the Companies Bill in 2009. Inyathelo prepared a response to the Draft Code
that was circulated to the non-profit sector. We have received endorsements of our position from 57 organisations and 17 individuals. Our document has now been forwarded to the IoD as a formal submission.
Key areas raised focus on the difference between commercial entities and non-profit entities and our submission points out the following:
1. While the report describes the board’s paramount responsibility “as the positive performance of the company in creating value for its shareholders”, civil society organisations have stakeholders.
2. Implicit in the term shareholding is the intent of legal ownership, which dramatically distinguishes governance practices of for-profit from non-profit entities as it does not apply to nonprofit organisations.
3. Members of non-profit boards serve for social value and not for financial reward, a distinction not taken into account.
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4. The voluntary nature of non-profit boards is a dynamic that the report does not take into
account when dealing with measurement of board performance.
5. Key to the paradigm of the report is that the market is the ultimate compliance officer of
entities. This does not fit the paradigm in which non-profits operate.
6. Insofar as the composition of non-profit boards is concerned, the report is drafted as if it is oblivious to the fact that generally all non-profit boards are non-executive.
7. The report’s call for standing committees is impractical given that it is hard enough for many
non-profit organisations to find board members. Inyathelo proposes that a sub-committee be appointed to develop a chapter within the report that will specifically address governance matters
within non-profit organisations.
For a copy of the full submission click here
By Peter Hendricks, Senior Coordinator Governance & Policy Development
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